1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," providing for tax credits for rehabilitation and
11reconstruction of certain factory and mill buildings and for
12a business tax credit.

13The General Assembly of the Commonwealth of Pennsylvania
14hereby enacts as follows:

15Section 1. The act of March 4, 1971 (P.L.6, No.2), known as 
16the Tax Reform Code of 1971, is amended by adding an article to
17read:

18ARTICLE XVII-J

19FACTORY OR MILL BUILDING

20AND ECONOMIC REVITALIZATION

21Section 1701-J. Definitions.

22The following words and phrases when used in this article

1shall have the meanings given to them in this section unless the
2context clearly indicates otherwise:

3"Certifiable building." A factory or mill complex or a
4building the use of which conforms to the comprehensive plan and
5local land use management ordinances of the municipality in
6which the factory or mill complex or building is located and
7that:

8(1) was constructed prior to January 1, 1960;

9(2) has at least one floor, excluding a basement;

10(3) has been, is or will be used primarily for
11manufacturing, processing, wholesale trade and other
12commercial purposes;

13(4) is proposed for substantial rehabilitation;

14(5) has been at a minimum 75% vacant for a minimum of 24
15months at the time of submission by the municipality;

16(6) is designated by the municipality for consideration
17as a certifiable building as provided in this article; and

18(7) meets any other requirement established by the
19department.

20"Certified building." A building with respect to which the
21Department of Community and Economic Development has issued a
22written notice of final designation as a certified building
23pursuant to section 1703-J.

24"Certified building owner." An individual, partnership,
25corporation, limited liability company or other entity which is
26the owner of record of a certified building and may include one
27or more successors in title to the owner of the building at the
28time the building received written notice of final designation
29as a certified building pursuant to section 1703-J. The term
30includes the owner of a leasehold interest with a minimum term

1of 30 years, with respect to which a memorandum of lease has
2been recorded in the office of the recorder of deeds of the
3county.

4"Department." The Department of Community and Economic
5Development of the Commonwealth.

6"Eligible business." Any business, corporation, sole
7proprietorship, partnership, limited partnership or limited
8liability company or other entity that:

9(1) is located in a certified building after the
10building has undergone substantial rehabilitation;

11(2) is engaged principally in manufacturing, processing,
12wholesale trade or other commercial business activities;

13(3) has total Pennsylvania salaries and wages that
14exceed the total Pennsylvania salaries and wages paid to its
15employees in the prior calendar year;

16(4) has received certification from the department in
17accordance with rules and regulations of the department; and

18(5) as part of its annual certification:

19(i) obtains certificates of good standing from the
20Department of Revenue, the Corporation Bureau of the
21Department of State and the appropriate municipal
22authority;

23(ii) provides the department an affidavit stating
24under oath that the entity seeking certification as a
25qualified business has not within the preceding 12 months
26from the date of application for certification changed
27its legal status or location solely for the purpose of
28gaining favorable treatment under this article; and

29(iii) meets any other requirement as may be set
30forth by the department.

1"Factory or mill complex." One or more factory or mill
2buildings, located on the same or contiguous parcels of land,
3each of which, at one time, had the same owner or owners.

4"Municipality." A city, borough, incorporated town or
5township.

6"Qualified employee." A full-time employee of an eligible
7business whose business activity originates and terminates from
8within the eligible business and certified building on a daily
9basis, who is employed by the eligible business at the end of
10the calendar year and who is a resident of this Commonwealth.

11"Qualified tax liability." Tax liability imposed on a
12taxpayer under Article III, IV, VI, VII, VIII, IX, XI or XV,
13excluding any tax withheld by an employer under Article III.

14"Rehabilitation and reconstruction costs." As follows:

15(1) Only those amounts incurred and paid by the
16certified building owner, after issuance of the notice of
17final designation of the building, solely and exclusively for
18the rehabilitation of the certified building and which are
19incurred and paid by the certified building owner to acquire
20tangible personal property and structural components of the
21certified building which:

22(i) are depreciated pursuant to section 26 of the
23Internal Revenue Code of 1986 (Public Law 99-514, 26
24U.S.C. § 167;

25(ii) have a useful life of three years or more as
26evidenced by the tax depreciation method taken and shown
27on the Federal tax return of the certified building
28owner; and

29(iii) are acquired by purchase as defined in section
30179(d) of the Internal Revenue Code of 1986 (26 U.S.C. §

1179(d).

2(2) The term does not include amounts incurred or paid
3with respect to tangible personal property and structural
4components of the certified building which the certified
5building owner leases from any other person or corporation.
6For purposes of this paragraph, any contract or agreement to
7lease or rent or for a license to use the property shall be
8considered a lease unless the contract or agreement is
9treated for Federal income tax purposes of the certified
10building owner as an installment purchase rather than a
11lease.

12"Salaries and wages." Salaries, wages, tips and other
13compensation as defined in section 61 of the Internal Revenue
14Code of 1986 (Public Law 99-514, 26 U.S.C. § 61).

15"Substantial rehabilitation." Rehabilitation or
16reconstruction costs of a certified building in a dollar amount
17that equals or exceeds 20% of the market value of the certified
18building prior to rehabilitation or reconstruction, as the prior
19market value is determined by a Commonwealth licensed and
20certified appraiser who is independent of the certified building
21owner or owners and their affiliated corporations and any
22tenants of the certified building and their affiliated
23corporations.

24Section 1702-J. Building certification process.

25(a) Initial consideration.--A municipality shall submit to
26the department a list of industrial factory or mill structures
27located within the municipality for consideration by the
28department as to whether any of these structures qualify as
29certifiable buildings. The department shall notify the
30municipality as to which structures qualify as certifiable

1buildings.

2(b) Designation.--Eighteen months following the effective
3date of this section, any building designated by the department
4as a certifiable building may be submitted by the municipality
5to the department for preliminary designation as a certified
6building if the municipality has given notice to the department:

7(1) that within six months of the designation, the
8municipality agrees to adopt an ordinance to:

9(i) expedite the building permit review and approval
10process required in the municipality for the
11rehabilitation of certified buildings;

12(ii) waive all building permit fees of the
13municipality for the rehabilitation of certified
14buildings;

15(iii) provide design standards in the municipality
16which encourage historic preservation of certified
17buildings and that conform to rehabilitation design
18standards developed and recommended by the Pennsylvania
19Historical and Museum Commission and the United States
20Secretary of the Interior's Standards for the Treatment
21of Historic Properties;

22(iv) require the review and approval by the
23Pennsylvania Historical and Museum Commission be obtained
24for the rehabilitation of any certified building in the
25municipality;

26(2) that within six months of the designation, the
27municipality agrees to establish a program for eligible
28businesses which coordinates the economic development
29activities of State and local business assistance programs
30and agencies; and

1(3) that the building has been determined eligible for
2listing on the National Register of Historic Places or is
3already listed on the National Register of Historic Places.

4(c) Treatment as separate building.--A portion of a building
5may be treated as a separate building for purposes of this
6article if:

7(1) it consists of a clearly identifiable part of a
8certifiable building, including, without limitation, one or
9more wings, stories or other separable portions of a
10certifiable building;

11(2) it is held by a single owner, whether in fee or as a
12condominium, cooperative or leasehold interest; and

13(3) at least one eligible business reasonably could be
14operated within the confines of the portion of the building.

15Section 1703-J. Notice of final designation of certified
16building.

17Upon notice to the department that the municipality has
18satisfied the requirements of section 1702-J(b)(2)(i), (ii),
19(iii) and (iv) and (3), the department shall provide to the
20municipality and to the certified building owner a written
21notice of final designation, which notice shall include a
22statement that an independent appraisal is required in order to
23document substantial rehabilitation.

24Section 1704-J. Certified building rehabilitation.

25(a) General rule.--A certified building shall be treated as
26having been substantially rehabilitated only if the
27reconstruction and rehabilitation expenditures incurred during
28the 24-month period selected by the certified building owner and
29ending with or within the taxable year in which the
30rehabilitated certified building is first placed in service by

1the certified building owner meet the definition of "substantial
2rehabilitation." For purposes of determining whether the
3certified building has been substantially rehabilitated, the
4market value of the certified building shall be determined at
5the beginning of the first day of the 24-month period.

6(b) Special rule for phased rehabilitation.--In the case of
7any rehabilitation which may reasonably be expected to be
8completed in phases set forth in architectural, engineering and
9relevant historic preservation plans, documentation and
10specifications completed before the rehabilitation begins,
11subsection (a) shall be applied by substituting a 60-month
12period for the 24-month period.

13Section 1705-J. Tax credit.

14(a) General rule.--A certified building owner may be allowed
15a tax credit against the qualified tax liability of the owner.

16(b) Eligible costs.--The taxpayer may claim a tax credit for
17the rehabilitation and reconstruction costs of a certified
18building which has been substantially rehabilitated. Once
19substantial rehabilitation is established by the taxpayer, the
20taxpayer may claim a tax credit for all rehabilitation and
21reconstruction costs incurred with respect to the certified
22building within five years from the date of final designation of
23the certified building under 1703-J.

24(c) Amount.--The tax credit shall be 25% of the
25rehabilitation and reconstruction costs of the certified
26building. The tax credit shall be allowable in the year the
27substantially rehabilitated certified building is first placed
28into service, which is the year in which, under the taxpayer's
29depreciation practice, the period for depreciation with respect
30to the property begins, or the year in which the property is

1placed in a condition or state of readiness and availability for
2its specifically assigned function, whichever is earlier.

3(d) Limitations.--Amounts of unused tax credit may be
4carried over and offset against the taxpayer's qualified tax
5liability for a period not to exceed the following seven taxable
6years. A taxpayer is not entitled to carry back, obtain a refund
7of, sell or assign an unused tax credit.

8Section 1706-J. Business tax credit.

9A taxpayer who owns and operates an eligible business within
10a certified building that has been substantially rehabilitated
11is allowed a tax credit against the qualified tax liability of
12the taxpayer as follows:

13(1) A tax credit equal to 100% of the total amount of
14Pennsylvania salaries and wages as are paid to qualified
15employees in excess of Pennsylvania salaries and wages paid
16to the same employees in the prior calendar year. The maximum
17tax credit allowable per taxable year under the provisions of
18this paragraph is $5,000 per qualified employee.

19(2) A tax credit provided in paragraph (1) shall not
20offset any tax liability in years other than the year in
21which the taxpayer qualifies for the tax credit. A taxpayer
22is not entitled to carry back, obtain a refund of, sell or
23assign an unused tax credit.

24(3) In the case of multiple business owners, the tax
25credit provided in paragraph (1) is apportioned according to
26the ownership interests of the eligible business.

27Section 1707-J. Interest income.

28(a) Loans to eligible businesses.--A taxpayer is allowed a
29tax credit of 10% of the qualified tax liability of the taxpayer
30for interest earned and paid on loans made to eligible

1businesses, solely and exclusively for expenditures within the
2certified building.

3(b) Loans for substantial rehabilitation.--The taxpayer is
4further allowed a tax credit of 100% of the qualified tax
5liability of the taxpayer for interest earned on loans made
6solely and exclusively for the purpose of substantial
7rehabilitation.

8(c) Limitation.--A tax credit under this section shall not
9offset any tax liability in taxable years other than the year in
10which the taxpayer qualifies for the tax credit. A taxpayer is
11not entitled to carry back, obtain a refund of, sell or assign
12an unused tax credit.

13(d) Amount.--The taxpayer is allowed a maximum tax credit of
14$10,000 per taxable year under subsection (a). The taxpayer is
15allowed a maximum tax credit of $20,000 per taxable year under
16subsection (b).

17Section 1708-J. Revocation of certification.

18The department may revoke the certification of any building
19certified under section 1702-J, and may revoke the eligibility
20of any business defined as an eligible business, for
21noncompliance with the provisions of this article.

22Section 1709-J. Limitation.

23The total aggregate amount of tax credits approved under this
24article shall not exceed $10,000,000 in a fiscal year.

25Section 1710-J. Penalties.

26(a) Failure to maintain operations.--A certified building
27owner that receives a tax credit and fails to substantially
28maintain existing operations in the certified building for which
29the tax credit is claimed for a period of five years from the
30date the tax credit is first allowable shall be required to

1refund to the Commonwealth the total amount of credit or credits
2granted.

3(b) Waiver.--The department may waive the penalty outlined
4in subsection (a) if it is determined that a certified building
5owner's operations were not maintained because of circumstances
6beyond the owner's control. Such circumstances include natural
7disasters, unforeseen industry trends or a loss of a major
8supplier or market.

9Section 1711-J. Regulations.

10The department shall promulgate regulations as may be
11necessary to administer this article.

12Section 1712-J. Report to General Assembly.

13(a) Report.--No later than June 1, 2015, and September 1 of
14each year thereafter, the Secretary of Community and Economic
15Development shall submit a report to the General Assembly
16summarizing the effectiveness of the tax credits provided by
17this article. The report shall include the the names of all
18taxpayers utilizing any tax credit under this article as of the
19date of the report and the amount of credit approved for and
20utilized by each taxpayer. The report may also include any
21recommendations for changes in the calculation or administration
22of the tax credits. The report shall be submitted to the
23chairman and minority chairman of the Appropriations and Finance
24Committees of the Senate and the chairman and minority chairman
25of the Appropriations and Finance Committees of the House of
26Representatives.

27(b) Public information.--Notwithstanding any law providing
28for the confidentiality of tax records, the information in the
29report shall be public information, and all report information
30shall be posted on the department's Internet website.

1Section 2. The addition of Article XVII-J of the act applies
2to tax years beginning after December 31, 2013.

3Section 3. This act shall take effect immediately.